On January $1,20$x$1$ Pumpkin Corp. acquired $80\%$ of Squash Corp. for $$500,000$ when Squash's

stockholders' equity consisted of $$75,000$ of common stock, $$200,000$ of additional paid in capital,

and $$200,000$ of retained earnings. The assets and liabilities of Squash were at fair value except for

inventory which was understated by $$15,000,$ a building which was understated by $$50,000$ and a note payable

which was overstated by $$25,000.$ The inventory of Squash Corp. on January $1,20$x$1$ was sold during $20$x$1.$

On January $1,20$x$1$ the equipment had a remaining useful life of $10$ years. The note payable was due in full

$5$ years from the date of the acquisition.

Squash Corp. typically declares and pays their dividends in April of a given year, if any. Squash

reported the following net income and dividends in $20$x$1,20$x$2$ and $20$x$3$:

Net Income Dividends

$20$x$1$ $ $100,000$ $ $20,000$

$20$x$2130,00050,000$

$20$x$3180,00080,000$

Pre$-$close trial balance information for Pumpkin Corp. prior to applying the equity method for the

investment in Squash as of year$-$end and post$-$close trial balance information for Squash Corp. as of and for

the year ended December $31,20$x$3$ are as follows:Pumpkin Squash

Cash and Cash Equivalents $ $30,250$ $ $80,000$

Accounts Receivable $183,250100,000$

Inventories $278,000195,000$

Property, Plant, & Equipment $($net$)700,000535,000$

Investment in Squash $534,000-$

Accounts Payable $85,00040,000$

Other Current Liabilities $251,00055,000$

Notes Payable and Other LT Debt $300,00080,000$

Common Stock $200,00075,000$

APIC $50,000200,000$

Retained Earnings $($including current year earnings$)839,500460,000$

Sales $600,000500,000$

Cost of Sales $200,000270,000$

Expenses $80,00050,000$

During $20$x$1$ Pumpkin Corp. sold inventory to Squash Corp. with a cost to Pumpkin Corp. of $$15,000.$

In selling the inventory, Pumpkin Corp. set its selling price at a mark$-$up of $100\%$ over its cost. At year$-$end,

Squash's inventory records included $$6,000$ of inventory from Pumpkin Corp.

During $20$x$2$ Squash Corp. sold inventory to Pumpkin Corp. with a cost to Squash Corp. of $$10,000.$

In selling the inventory, Squash Corp. set its selling price to make a gross margin of $50\%.$ At year$-$end,

Pumpkin's inventory records included $$5,000$ of inventory from Squash Corp.

During $20$x$3$ Pumpkin Corp. sold inventory to Squash Corp. with a cost to Pumpkin Corp. of $$20,000.$

In selling the inventory, Pumpkin Corp. set its selling price at $$40,000.$ At year$-$end, Squash Corp's inventory

records included $$4,000$ of inventory from Pumpkin Corp.Prepare the journal entries to eliminate the intercompany sales and profits in the consolidated financial

statements of Pumpkin Corp. and Subsidiary as of and for the three years ended December $31,20$x$3$ on

a separate tab in your Chapter $5$ Excel file. Indicate whether the sales were $$downstream$$ or $$upstream$.$

c$.)$ Revise your roll$-$forward of Pumpkin's equity method investment in Squash to properly record the impact of the

journal entries to eliminate the intercompany sales and profits as of and for the three years ended

December $31,20$x$3.$ Be sure to review the "Calculations Tab" fully before proceeding.

d$.)$ Revise the consolidating worksheet, including the consolidating balance sheet, income statement, and

statement of retained earnings, for Pumpkin Corp. and Subsidiary as of and for the year ended

December $31,20$x$3.$